Carl’s Heating and Air

A Las Vegas Tuck-In Acquisition

Solve the Seller’s Real Problem

Most buyers focus on what they want out of a deal. Tom emphasizes that the winning move is to figure out what the seller actually needs and wants—and structure around that. With Carl’s, two competing offers required the seller to keep his building and collect rent from the new owner.  They were basically offering to buy the business as a standalone business.  That meant that the operation would still run out of the same building and the new owners would pay rent to the previous owner of the business. That may be good for some people but the previous owner wasn’t looking for a payout over time.  He wanted as much money as he could get as soon as possible. 

Tom recognized he didn’t need the real estate.  He could buy the business and tuck in the business to his existing one in Vegas and leave the building. That would free the seller to sell the building separately and pocket a substantial gain up front. By asking better questions during the interview, Tom also discovered the seller had a debt he wanted cleared, which shaped the cash-up-front component of the offer. Listening, not pitching, is what put Tom’s offer ahead of two competitors.

Know What the Business Is Worth to You

A business has one valuation to the open market and a different valuation to a strategic buyer who can absorb it without adding overhead. Tom analyzed Carl’s by applying his own gross margin percentage to Carl’s revenue, he recognized that nearly all of that margin would drop straight to his bottom line because he wasn’t taking on the building, the trucks, or the office staff.

Let’s assume that you are looking at buying a company that does 10 million in revenue and produces only 500,000 in EBITDA or profit.  To many people, if they are buying it as a standalone business, they would pay a multiple of that 500,000 dollars.  Let’s assume that they were only willing to pay 4 times that 500,000 dollar number.  That would be 2 million dollars.  If you are tucking this business into your own business though and you don’t need to add any overhead to service those customers, and you have a 50% gross margin, you could, theoretically, bring in 10 million more revenue with 5 million in gross profit.  That gross profit would go straight to the bottom line of your company.  Even if you thought you would lose some clients, so you only would get 8 million in revenue off of it, you would still bring in 4 million in gross profit. 

To believed that he was going to be able to sell his whole company at a 15–16x multiple on the profit of his platform. The business was worth significantly more to Tom than it was to anyone else at the table. If, for instance, the business made 5 million in gross margin and that went straight to the bottom line, and Tom got 15 times profit when he sold his whole platform, that would be worth 15 X 5 = 75 million dollars. These are not the actual numbers of the business.  The author of this article does not have permission to publish the actual numbers but they are close and the principle stands.

Knowing you total upside doesn’t mean handing the entire upside to the seller—it means having the confidence to pay a little more than competitors and still capture the majority of the value yourself.

Acquisitions Accelerate Growth, But Can’t Replace It

Tom is direct about the limits of an acquisition strategy: buying customers is still a cost of customer acquisition, just like marketing spend. If a company has no organic growth and is only growing through tuck-ins, that’s a structural problem—and private equity buyers will either pass entirely or discount the offer to account for the future acquisition costs they’ll inherit. Tuck-ins like Carl’s are meant to add to a healthy organic growth engine, not replace it. Tom views every acquisition through that lens: it’s leverage on top of a strong base, not a substitute for one.

The Opportunity

By the time Carl’s Heating and Air came onto Tom’s radar, his Las Vegas platform was already taking shape. He had previously acquired Prozone and Ice Air Conditioning and combined them under the Lee’s Air, Plumbing and Heating banner in the Las Vegas market. Carl’s represented a natural next step—a tuck-in that could meaningfully expand the customer base of an already-growing operation. The complication was that Tom was not the only buyer at the table. Two other offers were already in front of the seller, and both were structured around keeping the seller’s building in play and paying him rent going forward. To win the deal, Tom had to pitch a structure the seller would prefer—not just a higher number.

The Analysis

Tom’s analysis began with a conversation. By interviewing the owner directly, he uncovered two motivations that shaped the entire offer: the seller owned a valuable building he no longer needed tied up in the business, and he had a debt he wanted cleared on closing. The competing offers solved neither problem cleanly. Tom structured an offer that paid enough cash up front to wipe out the debt, released the seller from the building so he could sell it separately and capture that profit himself, and made up the remaining value through stock in Tom’s company—giving the seller meaningful upside if the larger platform continued to grow.

On the valuation side, Tom sent a team member into Carl’s for a week to sample incoming service calls and count how many customers had air conditioning systems older than ten years—a fast proxy for the replacement revenue embedded in the customer base. From there, he figured out how much revenue he could make off of those same calls. He then layered Lee’s gross margin percentage onto what he thought he could get from the phone calls coming in from Carl’s, recognizing that since he wasn’t absorbing the office staff, the trucks, or the building, almost all of that gross margin would flow straight to the bottom line. Applied against the 15–16x multiple his platform would command at exit, the business was worth materially more to Tom than to a non-strategic buyer. Tom is careful to note that this advantage doesn’t entitle the seller to all of the upside—it’s the buyer’s edge, and the right move is to pay a bit more than competitors while keeping the majority of the synergy value for the platform that creates it.

There was one additional wrinkle: Tom was planning to take Lee’s to market in roughly nine months from the time he was planning on buying Carl’s. That meant he wouldn’t have a full twelve months of Carl’s earnings on the books before sale, and most buyers won’t give credit for projected upside. Tom decided the trade was still worth it—a strong growth rate driven by the acquisition would itself be a selling point, even if the full earnings hadn’t seasoned.

The Result

The Carl’s acquisition closed cleanly and integrated faster than most. Because Tom wasn’t taking on the office staff, the building, or the fleet, there was almost nothing to merge operationally. The team simply forwarded Carl’s phone number to Lee’s call center under a tracked “Carl’s campaign,” and trained dispatchers to greet incoming callers warmly: when a customer asked for Carl, the team explained that the owner had retired and asked Lee’s to take care of his customers, then immediately pivoted to “what can we do to help you?” That single handoff script preserved the customer relationship and let Lee’s start generating profit on the acquired calls almost immediately—rather than waiting the typical several months for a full operational merger to settle.

The financial impact was significant. Lee’s growth rate in Las Vegas accelerated noticeably after the deal, profitability climbed, and the platform became markedly more solid heading into its sale process. The seller, for his part, walked away with his debt cleared, a freed-up building he could sell at full value, and equity in a larger, faster-growing company. For Tom, Carl’s stands as a textbook example of how a tuck-in works when the buyer takes the time to understand the seller’s actual problem—and structures an offer no one else at the table thought to make.